Willis Group reacted negatively to a recommendation from an advisory firm last week to Towers Watson stockholders to reject its planned merger with the insurance broker.
Proxy firm Institutional Shareholder Services Inc. told shareholders of Towers Watson & Co. that the proposed merger with Willis, valued at $18 billion, was not in the company’s best interests – although it would benefit Willis.
ISS believes Towers Watson shareholders are being asked to accept too low a price for the merger, in view of the company’s strong balance sheet and growth prospects. The firm pointed particularly to Towers Watson’s health-exchange business, which helps companies connect their employees with insurance policies, as a source of future growth.
ISS also suggested the fact that the company had not negotiated with any other potential buyers other than Willis was a sign that the merger was not well advised.
“Although the potential long-term benefits of the deal appear compelling, it is not at all clear that realizing those opportunities necessitates taking a steep discount,” ISS wrote in a report in anticipation of the November 18 vote.
Now Willis is hitting back, defending its offer for Towers Watson as fair and the future growth prospects of the merged company as bright.
“We believe that this perspective neglects the estimated $4.7 billion in incremental value for shareholders that we expect through clearly identified cost, tax and revenue synergies,” said Willis CEO Dominic Casserley. “We respectfully disagree with the conclusion reached by ISS.”
The company statement continued, saying the broker is “pleased that ISS recognizes the strategic merits and long-term benefits of the merger.”
“However, we are disappointed with their conclusion that Towers Watson shareholders should not support the merger.”
Towers Watson also said in a news release that it disagreed with the ISS conclusion, saying the advisory firm did not credit “the significant long-term value creation potential of the proposed merger with Willis.”
“We firmly believe that the combination with Willis is in the best interest of our shareholders and remain committed to successfully completing the transaction,” the company said.
Recommendations from proxy advisory firms are taken seriously, the Wall Street Journal noted, especially when stockholders are split in their decisions.
The final stockholder vote on the merger is scheduled for November 18.
